Port Strike a Headache for Shippers but a Potential Tailwind for Certain US Transport Stocks

As anticipated, the International Longshoremen’s Association has implemented a work stoppage across US East Coast and Gulf Coast ports. As we understand it, the dockworkers union initially wanted a more than 70% wage increase over a six-year period to return to the negotiating table. Before the strike, it seemed the Biden administration was hesitant to intervene via the Taft-Hartley Act. The potential duration of the strike thus remains uncertain.

Retailers have already been pulling forward imports and diverting shipments to US West Coast ports in anticipation of a strike, especially with the peak season coming up. This dynamic has been a net positive for most Class I railroads, as freight coming through West Coast gateways is more likely to be an intermodal move. As a result, international intermodal volume has spiked this year, offsetting stubborn domestic intermodal headwinds from depressed truckload sector rates.

The work stoppage could also prove a slight (and short-lived) tailwind for global air and ocean forwarders like Expeditors International EXPD and CH Robinson Worldwide CHRW. Port and supply chain disruption can initially create gross profit margin headwinds if buy rates for capacity spike (higher ocean carrier pricing), but it tends to drive up volume as shippers turn to third-party logistics providers to navigate shifting capacity availability.

We suspect the impact on the US trucking sector will depend on the length of the strike. A prolonged stoppage (perhaps more than a week) could create West Coast port congestion. Delays would likely cause shippers to transload some freight directly to full-truckload carriers like Knight-Swift Transportation Holdings KNX rather than use intermodal to speed up the process. This could tighten capacity and boost spot rates on certain lanes. Recall that the truckload industry has been grappling with excess capacity for the past few years.